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The regulatory body said with £500bn of assets under management, the investment platforms market has nearly doubled in size since 2013.
A further 2.2 million customer accounts were opened during the period. The FCA said as consumers are depending on investment platforms to manage their investments it is crucial to make sure that competition between platforms is working well.
In its interim findings, the FCA has found that competition is not working well as desired for some consumers.
The regulator is concerned about consumers who could benefit from switching but find it tricky or costly to do; using direct-to-consumers (D2C) platforms who particularly want to select on the basis of price.
It also has concerns on orphan clients; who leverage model portfolios; customers with large cash balances who may not be aware they are missing out on investment returns or on the interest they forego by holding cash this way.
FCA executive director of strategy and competition Christopher Woolard said: “This is a market that has seen significant growth in the past five years with more customers than ever deciding to use a platform to manage their money. We know that competition is working well for many but it is important that the problems we have identified are addressed so that consumers don’t lose out.
“We have outlined a package of measures today to address the issues we have found, but we also want to see the industry step up, making it easier for consumers to transfer from one platform to another.”
A package of remedies has been proposed targeted at the five groups of consumers to address the concerns found by the FCA.
Measures include strengthening the extent to which platforms drive competition between asset managers, actions to make it easier for investors and advisers to switch platforms, tackling price discrimination between orphan and existing clients and alert customers who hold large cash balances.
Feedback is being sought on the FCA’s initial findings and proposed remedies prior to publishing its final conclusions about the market early next year.